Optus posts drop in revenue, profit

Optus, the biggest competitor to Australia’s dominant telecommunications provider Telstra, has reported falling revenue and profit for the June quarter.

The disappointing result was driven by a drop in mobile subscribers, a fall in equipment sales, and a reduction in its ability to charge consumers for terminating contracts.

Optus, the local operation of dual-listed
Singapore Telecommunications
, showed a 1.8 per cent drop in net profit to $164 million for the June quarter, compared to $167 million for the same period last year, as year-on-year operating revenue declined 2.8 per cent.

Investors had been hoping for evidence a recently revamped advertising and marketing campaign was helping the telco win customers, but Optus lost 126,000 mobile subscribers in the past 12 months. It now has 9.4 million subscribers.

Prepaid mobile subscriptions edged up just 0.1 per cent while postpaid subscribers fell 2.4 per cent. Total mobile subscriptions declined 1.3 per cent.

Average revenue per user per month, a key measure for telecommunications analysts, showed a modest increase of 0.7 per cent overall. ARPU per month for prepaid customers added 10.9 per cent but fell 2 per cent for postpaid customers.

June quarter underlying net profit rose 12.3 per cent year on year to $187 million, while earnings before interest tax depreciation and amortisation grew 4.4 per cent to $597 million for the quarter.

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Australian mobile service revenue was stable, reflecting the strategy to drive data revenue growth, the company said. But it blamed the continuing effect of the industry-mandated reduction in mobile termination rates and lower equipment sales for a 1.5 per cent decline in total mobile revenue.

Optus highlighted its investment in new 4G mobile networks and spectrum upgrades in Darwin and Perth during the quarter.

“We’re upgrading our entire mobile network in preparation for access to 700MHz spectrum in January 2015, putting us well on track to offer 4G national coverage that reaches 90 per cent of the population by the end of March 2015. This spectrum will be used to bring 4G coverage to regional locations and improve indoor 4G experience for more customers," chief executive
Paul O’Sullivan
said.

The 4G customer base continues to grow steadily, with a further 1.3 million mobile customers joining the network over the past 12 months, Mr O’Sullivan said.

Other non-financial highlights pointed to in the company’s release included a 41 per cent drop in new complaints to the Telecommunications Ombudsman.

In Optus Business, revenue declined 3 per cent to $367 million amid price competition and a decline in legacy data revenues.

Group results

For the parent company, Singapore Telecommunications, both revenue and earnings before interest tax and depreciation were down 3 per cent to $S4.15 billion and $S1.25 billion respectively.

However, the company blamed foreign exchange markets for the decline, noting both results would have been stable in constant currency terms. The Australian dollar and regional currencies, such as the Indonesian rupiah, weakened significantly against the Singapore dollar over the period.

Ahead of the result, Commonwealth Bank of Australia analysts predicted SingTel would lift its full year guidance for the 2015 financial year, despite an expectation the company would be tracking below existing guidance for the first quarter due to currency.

SingTel-Optus reports on a financial year calendar that ends on March 31. The company made no adjustments to its full-year guidance.

On the local bourse at 10.50am AEST, Singapore Telecommunications was trading 0.3 per cent higher at $3.36, in line with a 0.3 per cent gain across the benchmark S&P/ASX 200 Index. Shares in SingTel-Optus have added 2.4 per cent over the past 12 months, compared to a rise of 7.3 per cent in the benchmark index.